If you are considering investing in the emerging South African Hedge Funds market, the first thing that comes to mind is probably the high fees. As in any investment, there are costs to pay. So, what are the hedge fund pros and cons that will help you decide whether or not to invest? Well, I am going to answer this in two parts – in Part 1, I’ll give my recommendations on why you should consider investing, and in Part 2, I’ll list some of the hedge fund locations in South Africa where you can find some good deals.
In South Africa, there are currently only a few well-established and highly successful hedge funds. So if you are a first time investor, it may be hard to get a loan or find investors to back your project. However, I do know of at least a few hedge fund projects that have managed to attract significant institutional and wealthy investors. As such, there are some things that you should look out for when looking into how to start a hedge fund with no money in South Africa. This article will detail these factors.
As with any other investment, you need to consider your risk profile. A key point to consider is the level of return you are expecting on your initial investment. As with almost any venture, your return potential is dependent on your initial risk appetite. So if you are looking for a hedge fund opportunity where you stand a reasonably good chance of making a decent profit, then you need to consider how much risk you can reasonably bear. Your personal circumstances will also go a long way towards determining this.
Next you need to look at the liquidity of your prospective fund. For instance, if you intend to use the fund to make investments in South African companies, you will want to find out how liquid they are. Liquidity refers to the ability of the investment to be quickly and easily bought or sold by either the buyer or seller. If the company is not liquid enough, the value of the stock or other derivative could decline sharply, reducing the value of your investment.
Another point to consider when looking at how to start a hedge fund with no money in South Africa is your exit strategy. How will you get your money out once your project becomes unprofitable? This is an area where good planning and research could really pay off. The best projects will provide you with good exit points: they will allow you to sell your investment when your project is not doing well or is about to turn sour. You should also find out whether there are any tax benefits available to you in relation to your investment.
Finally, you need to find out whether your potential fund has a physical address and its own telephone number. Also find out if the company is registered with the Accounting and Compliance Service of SA. If the answer to all these questions is negative, do not proceed with your planned fund investment. You may end up being scammed or just wasting your time and other money.
How to start a hedge fund with no money in South Africa is no different from the rest of the world. You should do as much research as possible to determine whether your chosen fund is reputable. Investigate their local reputation by speaking to people who have used them before. If you are planning to work with an offshore fund, visit the country where it is based to see if there are regulatory problems with offshore hedge funds.
Once you are ready to start investing in South African funds, you should keep some documents handy: a registration statement, annual accounts, and statements of any profits and losses. Also carry a list of the various fund managers that you have used in the past, so that you can check the performance of each one regularly. The most important thing that you should remember is to never put all of your eggs in one basket. In other words, make sure that you diversify your investments by spreading your risk. A well-diversified hedge fund is less risky than an individual portfolio and thus more likely to achieve a favorable return.
